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Backtests vs. Real Life in the Markets

If you lived under a rock in 2020 and didn’t pay attention to what was going on around you, simply looking at the performance number of the overall market would make you think things have been relatively boring this year.

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The Diversification Drag and the Management of Luck

You have to account for luck in the investment process. No one can prepare for good luck, but there are ways to manage bad luck. Diversification is one of the best tools available to avoid allowing bad luck to give you extreme outcomes at the worst times.

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The Best Source of Investment Income?

Fundamentals are more complex than they seem. One of the simplest, yet most overlooked, stock market fundamentals is the dividend yield. Dividends also happen to be one of the most resilient features of the stock market over the long-term.

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What Happens to Stocks After a Big Up Month?

One hard part about investing during such highly volatile periods is you can talk yourself into just about any scenario. Sometimes these huge bounces are the real thing. Other times they’re a mirage. By studying historical downtrends and volatile markets, we learn that they tend to open you up to a wider range of outcomes, both to the downside and the upside.

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Which Portfolio is Right for You?

Which portfolio is right for you? The one that you can stick to. And to find the portfolio that you can stick to, you have to have some idea for the amount of risk you are willing to bear.

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More Thoughts On Possible Worst Case Scenarios for Diversified Portfolios

If you want to earn higher returns, you have to be willing to accept more volatility and higher losses. And, if you want to see less volatility and shallower losses, you will have to accept lower returns. Risk and rewards are still attached at the hip. Investors just have to get used to the fact that the rewards are going to be lower than they were in the past for a while.

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Making Sense of a Stock Market that Doesn't Make Any Sense

The stock market can be one of the most confusing places on earth. The worst thing you could do in an investing environment like this is assume there is only a singular path forward. The second worst thing you could do is assume you know exactly what that path is. The market is likely to continue confounding investors of all shapes and sizes so it’s best to keep an open mind from here.

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Different Strategies for Putting Cash to Work During a Bear Market

Lucky or good, sitting in cash is not a horrible position to be in, but it does present its own set of challenges. The thing you absolutely don’t want to do is become so attached to your cash that you never get back in. Cash is comfortable in a bear market, but if you get stuck there, you will regret it someday. Remember: no one perfectly times these decisions.

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The Wild World of Yield Chasing

There are no ironclad rules when it comes to investing. Everything has a caveat or exception. But the closest thing to an ironclad rule is that risk and reward are attached at the hip. You can’t expect to earn higher returns without accepting higher risk in one form or another. And, you can’t expect lower risk in one form or another without accepting lower returns.

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The Same, But Different

People in the same investments can have very different experiences.

If you’ve been investing since the '90s, you have now seen your third big market downturn. If you started any time in the last 10 years, you can now say you know what it feels like to be in a bear market, but only sort of.

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Would You Rather: Buy Too Early or Buy Too Late in a Bear Market?

Buying too early means you could experience some pain if stocks continue to fall further. Buying too late means you could experience some pain if stocks have already bounced.

The stock market is the ultimate place for regret because there is always reason to second-guess your decisions. But this only really matters for people who concern themselves with the short term.

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The Corona Crisis vs. The Great Depression

Making economic or market comparisons to the Great Depression is almost always ridiculous…until now, that is. The daily price swings we’ve seen in the last month were beginning to rival what happened during the 1929-1932 period. The worst 10 daily returns since the late 1920s are dominated by the Great Depression, 1987, the Great Financial Crisis, and this month.

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When Should I Rebalance?

A portfolio rebalance is simply the act of returning to your pre-determined asset allocation. For most people, this involves at least two asset classes, with an infinite way to slice and dice the portfolio.

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How Are Diversified Portfolios Holding Up During the Crash?

If you want higher returns, you must accept a higher probability of large losses or other unforeseen risks. And, if you want to dampen large losses, you must accept the prospect of lower returns. There is no stronger relationship in all of investing than risk and reward. And the whole point of asset allocation is calibrating your personal risk profile with your portfolio holdings.

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Returns from the Bottom of Bear Markets

Will you invest at the absolute bottom? Not unless you’re ridiculously lucky. But the point remains that the bigger the losses, the higher the expected returns. This feels like an awful time to buy stocks. That’s usually a good sign.

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What Happens After The Stock Market Falls?

Buy low, sell high. Even if you know nothing about investing, you’ve heard this phrase before. With the S&P 500<sup>®</sup> Index off its highs, investors have an opportunity to execute on the first half of that statement. As stocks decline, they become more dangerous in the short-run but more attractive over the long-run.

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I'm Here to Remind You

You will see and hear amazing things today and this week—in stock prices, in oil prices, in government and central bank response. It's going to be a time you'll look back on. Unprecedented things are taking place. But I'm here to remind you of the things that are now still true and will always be true, regardless of what happens.
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From Paycheck to Portfolio

A decline early in your retirement can have a big impact on the value of your nest egg. You’d have to draw down a larger portion of your portfolio to meet your income needs, while a decline that occurs later might be less hazardous to your wealth.

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The Myth of Consistency

So much effort in investing goes toward "identifying winners." In the world of actively managed mutual funds, we search for managers who can outpace their peers and beat the market.

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The Active Investor's Field Guide

Recent financial innovations have created both a wealth of opportunity and an avalanche of complexity for investors. It has never been easier—or more overwhelming—to take investment risk. With complexity comes the need for simplification. How do investors cut through the noise and take control of their portfolios? This guide offers perspective on the so-called active and passive investing debate, with an eye toward prioritizing diversification, risk management, and investor behavior.

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What's Your Number?

There are four steps to calculating your "retirement number" - the number of dollars you most probably need as a sum of capital from which to draw a lifestyle-sustaining income without serious danger of running through the capital.

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